No more recession? The Yellowstone analogy


Forest fire in Yellowstone National Park 1988. Image: Public Domain

Central banks are trying hard to prevent a recession. This would be healthy and important. A cleansing fire.

Just as the forestry policy of suppressing forest fires has caused uncontrollable fires, central bank attempts to eradicate recessions have created a financial fire that is burning down the entire global financial system.

The first task of those involved in neoliberal global capitalism is to deny that global capitalism is in crisis. One manifestation of this is the policy of non-recession, which is the implicit goal of central banks and governments worldwide.

Any indication of a global slowdown will create an immediate and overwhelming flood of credit and money as central banks cut interest rates, buy bonds and stocks to push markets higher and trigger a tsunami of new credit, leaving companies with billions of dollars repurchase their own shares and shares, and consumers can continue to buy vehicles, houses and other goods.

Neoliberal global capitalism has an unspoken law: credits have to get bigger, otherwise the system will die. The rate of credit expansion may increase or decrease, but it has to expand forever.

This is the foundation of the policy that there is no longer a recession: as long as governments, consumers and businesses continue to borrow, nothing else matters.

But, as the Yellowstone analogy shows, something else is important as well: the financial deadwood from bad investments, bad debts and excessive speculation accumulates and creates the ideal conditions for a financial fire that will take the entire system.

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